A happy New Year for the boys in the bonus bonanza

It’s bonus time for many US and European executives. In Russia, they’re paid in March or April, the fiscal year end. But it can be worth the wait.

Research shows that Russian
bonuses are outpacing those in Western countries. After reviewing more than
half of Europe’s top 500 companies by market
capitalisation, Hay Group, a global management and consulting firm, discovered
that executive compensation packages rose by a median 6pc in 2010, whereas the
total cash increase to Russian executives was 19pc.

“Commodity companies, such
as oil and natural gas and metals, naturally pay the highest bonuses, followed
by banks and large financial institutions,” said Yuri Virovets, president of
HeadHunter, an employment website. “Real estate developers and major retail
chains come next, while transport and IT companies round out the list.”

According to Russian
business media, Oleg Deripaska, owner of aluminium giant UC Rusal, became the
highest-paid Russian chief executive in 2009 with 885.26m roubles (about £18m)
in salary and bonuses. National Media Group chairman Alexander Rodnyansky was
second with 831m roubles (£17.5m); Lev Khasis, the owner of X5 Retail Group,
Russia’s largest retail company, took home 545m roubles ( £ 11.5m); Vladimir
Strzhalkovsky, general director at mining and metals group Norilsk Nickel, was
ranked seventh with 136.33m roubles ( £ 2.9m); while Gazprom CEO Alexey Miller
is 10th with 111.3m roubles ( £ 2.35m).

The latest financial crisis
has demonstrated that a company’s financial performance is not always the only
deciding factor for the bonus. “Our bonus programme is directly linked not only
to budget priorities,” said Marina Storozhenko, HR director of the
Pronto-Moskva media holding company, “but it also affords an opportunity to be
rewarded for one’s personal contribution towards achieving certain priority
business goals set by each structural division of our company.”

Financial performance is an
important factor when awarding bonuses. At times, however, they are a tool to
retain a highly valued specialist, or are evidence of management’s attitude
towards a certain employee. A HeadHunter study shows that a fifth of the 6,000
people they polled believe companies they work for pay bonuses “for nothing”.
Mr Virovets, however, believes that this trend will change.

Sberbank, Russia’s largest bank, has become a pioneer among Russian
corporations by linking employee salaries to performance. The bank had already
introduced incentives programmes for chief executives: in March of this year,
executive compensation was linked to the bank’s key performance indicators.
Russian senior executives will receive a new portion of their bonuses in four
to five months’ time.

Maksim Lobada, an analyst
with Investcafe, said: “I believe bonuses will rise compared to 2009 if only
because markets have been recovering this year, and many companies dramatically
improved their performance.”

A joke circulating in late
2008, said: “The best bonus for 2008 is still having a job in 2009.”

“This is a reflection of
what has been happening to annual bonuses over the past three years,” said Mr
Virovets. “Only rank-and-file employees, mostly in state-owned companies, got
them in 2008. Private-sector managers – and far from all of them – saw their
bonuses return only at the end of 2009.” He expects that 80–90pc of managers will
be paid bonuses for 2010 from among those who received them in 2007.

Some Russian companies,
however, prefer to turn to the so-called 13th salary – an annual bonus copycat,
whereby an extra month’s salary is paid, most often to regular employees, at
the end of December.